Friday, 19 May 2017

Conservative Contradictions: the limits on Red Tories

There has been much
talk
of Re-leavers: those who voted to Remain but are now voting for
Theresa May to get the best Brexit deal. I had talked about something
similar long before the term arose (see here
and the previous linked post), so I do not think this is just an
artifact of particular poll questions. But I’m also sure that this
is not the only reason many Remainers will vote Conservative.

Some, as Ian Dunt
suggests,
just believe that Brexit is inevitable (as you would based on most of
the MSM [1]), and that May would be better at negotiating our exit
than Corbyn. Others always vote Conservative because they belong to
particular groups in society, and they are sure that party will -
whatever happens - protect their interests over others. Think the
typical Times reader for example. If we are talking about what you
might call the affluent middle class, their assumptions have a solid
empirical
base.

This becomes
important once you recognise the dismal economic outlook that faces
the UK over the next decade. Productivity growth has virtually
stopped. That means that, on current policies, growth in output per
head is likely to be pretty slow. In addition, the Brexit
depreciation will reduce real incomes, a process that has already
begun. Finally May seems determined to reduce immigration as far as
she can, which if it happens will damage the public finances.

Think of both the Conservative's core support and these dismal economic prospects in trying to decide how seriously to
take the interventionist proposals in Theresa May’s first
manifesto. (For good background discussion on this written before the
manifesto was published, see Rick here
and Geoffrey Wheatcroft here.)
The words in the manifesto are certainly different: for example

"We do not believe in untrammelled free markets. We reject the
cult of selfish individualism. We abhor social division, injustice,
unfairness and inequality. We see rigid dogma and ideology not just
as needless but dangerous."

Furthermore some of the proposals would have been condemned as
socialist nonsense in certain quarters if they had been made by
another party. For example a cap on energy bills, worker
‘representation’ on company boards, more council housing, a
‘modern industrial strategy’, and of course more measures to
discourage (and maybe control) immigration. Now not all of these
measures require serious money, but a lot of them do if they are to
be meaningful. And, unlike the Labour or LibDem proposals, the
Conservative’s plans are completely uncosted.

As a result, it becomes imperative to ask how much each measure will
cost, and where the money comes from, because that will reveal a
basic contradiction between rhetoric and reality. It is extremely
difficult if not impossible to tackle social division and inequality
if you want to protect your core supporters and are not increasing
the size of the cake. You could find the money by raising taxes on
business, but given Brexit the Conservatives are unlikely to reverse
their cuts in corporation tax. (Not so much because of their economic
effects, but to preserve the support of the business community which
has become strained by Brexit.) You could find the money by raising
taxes that largely impact on the better off, but that risks losing
your core support. You could put fiscal rectitude to one side, but
that would seriously tarnish the brand.

Given these
contradictions, the rhetoric above is only likely to be accompanied
by token gestures in reality. The most obvious thing May could have
done to help the just managing family was to scrap the proposed cuts
to in work benefits, and she did nothing. To be able to address
inequality and social division without taking away from the better
off you need a growing economy. The tragedy for Theresa May is that
her insistence that Brexit means controlling immigration ensures [2]
that is very unlikely to happen, and it is not clear she realises
this.

But surely the
change in rhetoric must mean something? The start of a Red Tory era,
or the re-emergence of pre-Thatcher Conservatism, or at least the
death of neoliberalism in the UK? I will start to believe those
things when the IFS starts expecting falls in child poverty, rather
than the - policy induced - increases they
project. I will start to believe it when the pledge to introduce inequality enhancing Grammar schools is dropped. Until then, I suspect all we may be seeing is the same grasp
of economics May has always displayed in government: she wants everyone to
have more, while implementing policies that impede economic growth. I
fear this Red Tory may be another symptom of the disease that hit the
UK with Brexit. We are in the 'have your cake and eat it' era, an era that through its own contradictions cannot last.

[1] The MSM where I
fear the idea that the current fall in real wages is down to Brexit
is now a ‘contested view’, thanks to recent remarks
by the Prime Minister.

[2] Both directly
through the impact of lower immigration on the public finances
(uncontested by the Conservatives, perhaps because it comes from the
OBR), and indirectly because it means we have to leave the Single
Market.

If she had any integrity she would not have switched so easily to Brexit land. If she had any knowledge of business and the economy she wouldn't have ruled out the Single Market and the customs union.She has a second-rate cabinet and is too powerful as a result.

".. or at least the death of neoliberalism in the UK? I will start to believe those things when the IFS starts expecting falls in child poverty, rather than the - policy induced - increases they project ... Until then, I suspect all we may be seeing is the same grasp of economics May has always displayed in government: she wants everyone to have more, while implementing policies that impede economic growth"

If we agree that “neo-liberalism” roughly describes the philosophical successor to classical liberalism it means among others (i) less government intervention in product markets, (ii) reduction of government interventions in social policy (e.g. relaxed immigration controls, introduction of things like equal marriage) and (iii) less redistribution through the tax system. May has signalled that her government is going to deviate from (i) and (ii) for sure, though not (iii) – which is what social democrats critical of neoliberalism care most about. But it is still an important deviation from “neo-liberalism” – just not one that e.g. George Monbiot would endorse. (another difference: neoliberalism for example is perfectly comfortable with membership of the EU (the four freedoms!) which is a rare issue of agreement with social democracy. For example Osborne appears to genuinely support EU membership).

If 1945-77 had social democracy as the dominant political philosophy; and 1977-2016 had neo-liberalism it may be that we are in for another shift – not back to social democracy – but towards a “neo-nationalism”. Closed off from the world, culturally traditional (fox hunting!) and isolated. As Janan Ganesh says, happy to sacrifice economic growth for “social order” – a tradeoff anathema to a proper neoliberal, rather than a left-wing caricature of one. More Farage than Osborne. If you need further convincing that neo-liberals are unhappy with the new May programme look at the “Treasury view” here (https://twitter.com/nickmacpherson2/status/865491940514578432).

So please don’t use “neo-liberal” as a catch-all term of abuse. There is nothing liberal about May’s programme.

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